UBS considers overhaul of asset management division to cut costs

Swiss bank UBS is contemplating a significant overhaul of its asset management division, aiming to slash several hundred million dollars in costs amid pressure on profits, sources familiar with the matter revealed to Reuters.

The primary focus of the review will be cost reduction, with UBS targeting at least $300 million in cuts, including downsizing Switzerland-based back-office staff who previously joined from Credit Suisse. Additionally, the bank is exploring the possibility of integrating certain parts of the unit into its larger wealth management operations.

A UBS representative declined to comment on the matter.

UBS has been in the process of integrating Credit Suisse following its acquisition last year. The asset management division, which contributed less than 7 per cent to UBS's total revenues in 2023, has been facing challenges in maintaining profitability, with the bank's wealth management division dominating the revenue share.

Despite the increase in invested assets following the acquisition of Credit Suisse, the asset management business experienced net outflows in the fourth quarter of 2023, slowing down fundraising efforts compared to the previous year.

Operating expenses at the asset management unit surged by 35 per cent in 2023, leading to a 5 per cent decline in underlying operating profit before tax compared to the previous year.

The review follows the appointment of UBS veteran Aleksandar Ivanovic to oversee asset management in late January. UBS aims to achieve a cost-to-income ratio below 70 per cent in the asset management division by the end of 2026, down from 80.2 per cent at the end of 2023.

UBS stressed on the importance of cost optimisation and growth in the asset management business while reinforcing its partnership with global wealth management.

Some within UBS believe that integrating parts of asset management into wealth management could enhance synergies, as both divisions often serve similar clients.

Wealth management, led by former Credit Suisse banker Iqbal Khan, focuses on catering to ultra-rich clients with longstanding banking relationships.

(With Reuters inputs)